Executive summary

The United Arab Emirates (UAE) Federal Tax Authority (FTA) issued Decision No. 13 of 2026 on Measures, Procedures and Conditions required by Taxable Persons for the Verification of the Validity and Integrity of the Supplies before Deduction of Input Tax (Decision). The Decision, issued on 22 July 2026, will come into effect on 1 October 2026. It provides detailed guidance on the practical application of Article 54 bis of the UAE Value-Added Tax (VAT) Law, under which the FTA will reject the deduction of input VAT if the supply, or supply chain, is related to tax evasion and the taxable person was aware, or should have been aware, of that connection. A taxable person is deemed to have been aware of such a connection if that person did not verify the validity and integrity of the supplies received before deducting input VAT, in accordance with the measures, procedures and conditions determined by the FTA.

The Decision establishes a framework of verification procedures that businesses must undertake before recovering input VAT. These procedures cover verifying suppliers, assessing supply arrangements, reviewing payment terms and the pricing conditions, documentation requirements and governance obligations.

The Decision also provides broader insight into the FTA's evolving compliance expectations by emphasizing taxpayer governance and due diligence in assessing counterparties and transactions, rather than relying solely on documentary evidence supporting VAT recovery.

Detailed discussion

The Decision applies for the purposes of Article 54 bis of the UAE VAT Law and requires taxable persons to verify the validity and integrity of supplies received before deducting input VAT.

Verification of suppliers

The Decision introduces detailed requirements for supplier verification. Businesses must verify supplier identities, including obtaining identification documents for natural persons and incorporation details for legal entities. Verification requirements also extend to confirming authorized representatives, supplier business locations and the compatibility of the locations with the supplier's activities.

Taxable persons are also required to assess supplier-related risks of tax evasion. The Decision identifies several risk indicators, including frequent changes in supplier addresses or key personnel and unusual commercial transactions that appear inconsistent with the supplier's business profile. If risk indicators are identified, businesses must retain documented explanations and supporting evidence.

If a supplier's transactions exceed United Arab Emirates Dirhams (AED) 375,000 over a previous 12-month period or are expected to exceed that amount over the next 12-month period, businesses must also confirm the supplier's bank account and review publicly available information, including customer reviews and media coverage, to identify potential indicators of tax evasion.

Verification of supplies

In addition to supplier verification, businesses must assess individual supplies and related transaction arrangements. The Decision requires taxpayers to evaluate whether transactions are based on genuine commercial reasons, and whether payment methods and conditions are commercially justifiable.

The Decision calls for special attention if (1) third parties are involved in payment arrangements, (2) payments are made to foreign bank accounts or (3) cash payments are made. Businesses must confirm that such arrangements have valid commercial justifications and are appropriately documented.

The Decision further requires taxpayers to assess whether transaction pricing aligns with market conditions, verify that supplies fall within the supplier's licensed business activities, and confirm the authenticity and origin of goods. Additional checks are required if suppliers act as intermediaries in a supply chain.

Documentation and governance requirements

The Decision requires businesses to document verification procedures performed for suppliers and supplies, and to retain supporting records. Taxable persons must also maintain documented policies identifying those responsible for implementing, reviewing and supervising verification procedures, together with their respective responsibilities and authorities.

Exceptions

The Decision provides an exception for taxable supplies for which the consideration, excluding VAT, is less than AED10,000. However, this exception does not apply if the total value of supplies received from the supplier exceeds AED100,000 over the previous 12 months or is expected to exceed this amount over the following 12 months.

Implications

The Decision represents a significant development in the UAE VAT compliance landscape by setting out detailed due diligence requirements that businesses must satisfy before recovering input VAT. Businesses should review existing procurement, supplier onboarding, finance and tax compliance procedures to determine whether they adequately address the new requirements.

Given the scope of the Decision, businesses should consider assessing how the new provisions interact with existing controls and governance frameworks before implementing additional measures. Businesses should also consider whether supplier due diligence, transaction review procedures, record retention processes and internal governance documentation require enhancements to support future VAT recovery claims.